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Pru boss Tidjane Thiam said the combined group will have 30million customers and will create a 'powerhouse' insurer.

'This transaction is hugely exciting and a one-off opportunity to transform the group.'

Reports suggested that the insurer may also look at selling its British arm to help fund the deal.

But Thiam suggested it would not be for sale in the immediate future. 'The UK generates cash and capital for us - it's a very important part of the group and sits comfortably within our portfolio.'

The Pru chief executive is understood to have lined up financing with investment banks including HSBC and JPMorgan.

AIG will retain a stake of around 11 per cent in the enlarged group, Pru added. The American insurer, which is 80 per cent owned by the US taxpayer, is scrambling for cash to re-pay the £120billion it has received in state funds.

Thiam, who has been in the job for only five months, will fly out to Hong Kong tomorrow to outline the deal to employees.

The group warned of potential job losses under 'some operational restructuring' that would save $340million (£227 million) a year.